Before Franchising in China: How to Test Whether a Business Can Run Without Its Founder

An outlet may run smoothly because the founder oversees it every day, loyal customers keep coming back, or the owner steps in whenever something goes wrong. Before moving into franchising, a business needs to answer a more specific question: could an operator who has completed the standard training still run the outlet to the required standards? A founder-absence test is a way to check this before offering franchises.

1. Turn legal requirements into test objectives

Article 7 of China’s Regulations on the Administration of Commercial Franchising requires franchisors to have a mature business model and the capacity to provide ongoing operational guidance, technical support, business training and related services. They must also meet the requirement to have at least two company-owned outlets that have been operating for more than one year.

A founder-absence test is not a statutory procedure, nor can it replace requirements such as the ‘two outlets, one year’ rule. It is an internal validation method: a way to check whether the business is offering franchisees an operational system they can follow, or an operation that only works with the founder personally involved.

Before testing, list the work the founder actually does. For example, is the owner the only person who can judge stock requirements, approve refunds, fill gaps in the rota or secure urgent replenishment from suppliers? Do not rely solely on job descriptions. Use on-site observation, work group chat histories and incident records to identify interventions that happen every day but have never been formally assigned to anyone.

Place each dependency in one of three categories: tasks the outlet should handle, tasks requiring routine head office support, and matters that still need exceptional management decisions. The aim is not to remove head office entirely, but to make support independent of any one person.

2. Set realistic but controlled boundaries for the founder’s absence

Choose a relatively stable company-owned outlet and put a manager who has completed the standard training in charge. Do not quietly hand control to a long-serving employee who knows the founder’s habits inside out, or temporarily add staff that a typical franchised outlet would not have. Otherwise, the test will only demonstrate what an exceptional team can achieve.

The test should cover a complete operating cycle, including ordering, deliveries, staff scheduling, trading, handovers and reconciliation. Wherever possible, it should also include peak periods and common operational problems. Set the duration according to the business cycle rather than presenting a fixed number of days as a universal standard.

Before starting, prepare a one-page test plan specifying:

• Which on-site tasks and remote approvals the founder will stop carrying out;
• Which decisions the outlet manager can make independently, and the limits of that authority;
• Which head office support channels the outlet may use;
• Which situations require immediate escalation or suspension of the test.

Any threat to personal safety, food safety or other serious compliance risks requires prompt intervention. Do not delay action simply to prove that the founder can step back. Any intervention by the founder should also be recorded honestly, rather than excluded from the results.

3. Record behind-the-scenes interventions, not just turnover

Stable turnover does not mean the test has succeeded. Staff may be working excessive hours, writing off more stock, postponing maintenance or even contacting the founder privately to keep things looking normal. Monitor quality, efficiency, costs and whether delegated authority works in practice, as well as sales.

Keep an intervention log. For each incident, record at least the trigger, the outlet’s initial assessment, the rules consulted, who was asked for help, the time taken to resolve it and the final outcome. In particular, note whether the outlet could have resolved the issue without the founder, and whether the existing head office team could have provided equivalent support.

For example, a manager discovers a shortage of ingredients but can only resolve it by calling the owner’s personal number. The owner then asks a familiar supplier to deliver. Even if no sales are lost that day, this exposes a replenishment process dependent on personal relationships. The remedy is not simply to tell the manager to ‘spot it earlier’. It is to establish stock alerts, replenishment authority and formal contact channels that an ordinary franchised outlet can use.

Also check whether decisions pile up in the founder’s absence: small refunds go unapproved, nobody adjusts the rota when an employee is unexpectedly absent, or customers are left waiting for an explanation. Such problems usually call for a clearer allocation of authority, not more matters requiring the owner’s approval.

4. Use retesting to decide whether to offer franchises

After the test, divide the problems into four categories: skills gaps, unclear rules, insufficient authority and resources that cannot be replicated. Assign responsibility for fixing each one. Do not attribute every problem to an incapable manager, as this can conceal genuine weaknesses in the business model.

Where resources depend on the founder’s personal relationships, establish whether they can become sustainable arrangements available to the business. Where tasks rely on personal judgement, define the decision criteria and escalation triggers. Once improvements are in place, have the usual staff perform the tasks again. Check whether the problems have genuinely disappeared, rather than having the person who wrote the rules stand beside them and prompt the answers.

Pass criteria should be set before the test and reflect the brand’s own quality standards, service commitments and realistic staffing levels. If serious risks remain unresolved, or key processes still frequently require the founder to step in, postpone franchise recruitment and fix the operating model first.

Nor should the results be presented as a guarantee of franchise profitability. China’s Regulations on the Administration of Commercial Franchising require franchisors to provide specified information and the contract text in writing at least 30 days before signing, and require disclosure to be truthful, complete and accurate. If you share test findings with prospective franchisees, explain the outlet’s circumstances, staffing levels and scope of head office support. Avoid showing only successful outcomes in a way that suggests the outlet can operate without support.

Practical takeaway: Start by listing the founder’s day-to-day interventions, then run an absence test with clear safety boundaries and a documented process. A business is closer to having a replicable franchise model only when an ordinary team can run it under standard procedures and head office can provide support through formal channels.